In a village 30km from Uganda’s capital Kampala, 29-year-old Emmanuel Kizito is supervising builders putting the final touches to his two bedroom house. “I want to move in with my family in September”, Kizito says.

Kizito’s house is the product of years of sacrifice and savings. “I owe this house to my job. I would be so broke without a single asset if it wasn’t for my employer”, he added.

Six years ago, the father of three started working as a machine operator at a Chinese company which makes steel bars and foam mattresses. His $160 salary means he can provide for his family. In Uganda, wages can be as low as $50 a month and unemployment is rampant.

“I consider myself lucky. Many of my peers are not doing as good as I am”, Kizito asserts.

Kizito is of the tens of thousands of Ugandans benefiting from increased Chinese investment in Uganda, particularly in the area of industrial capacity cooperation.

China is Uganda’s largest source of foreign investment

According to the Chinese Enterprises Chamber of commerce in Uganda, there are over 100 Chinese companies in Uganda. These has provided jobs to over 40,000 Ugandans. Chinese companies now have invested worth $4.2b (sh15.5 trillion) in Uganda, according to China’s embassy in Uganda.

“Chinese Foreign Direct Investment (FDI) in Uganda helps in facilitating growth-increased GDP, employment opportunities and potentially increasing the tax revenues. We need to channel Chinese FDIs more into manufacturing in order to harness more benefits”, said Martin Luther Munu, a research analyst at the Economic Policy Research Centre (EPRC).

Analysts say for Chinese investments to further benefit the Ugandan economy, Uganda has to make more investment policy amendments.

“In addition, we need an overall policy framework which ensures that FDI realizes its promises of jobs, tax revenues, technological transfer and overall structural transformation. This requires Uganda to rethink its investment policies which currently makes it hard for FDIs to realise these promises”, said Munu.

Liaoshen Industrial park

Liaoshen Industry Park, which is located at Luwero in central Uganda, is the first provincial-level economic and trade cooperation zone project in Africa with the backing of the Commerce Department of Liaoning province and Liaoning People’s Association for Friendship with Foreign Countries.

The park was inaugurated by Uganda’s president Yoweri Museveni in February this year.

Covering an area of 2.6 square kilometers, Liaoshen Industry Park received investment from two private businesses –– China’s Zhongda Group and Uganda’s Zhang Group –– and total investment in the industrial park is around $600 million. It is anticipated that Liaoshen Industry Park will contain 50 businesses and create around 16,000 jobs by 2025.

Geared to the needs of the East African market, Liaoshen Industry Park promises to take advantage of rich resources and preferential policies in Uganda, along with advanced production technology and management experience from Liaoning province to build itself into an international industrial park.

Uganda hopes that the centre will help boost commercial agriculture as farmers begin to abandon subsistence farming. According to Apollo Ssegawa, a manager at the facility, the Liaoshen industrial park will add much needed value to farm produce.

Construction of the park began in 2015.Currently, the construction of infrastructure and project promotional work at the park is still ongoing. Many of Liaoning province’s industrial projects, such as Kangwang ceramics project, Hemuyuan food project and Tianyuxin prefab house project, affirmed their settlement in Liaoshen Industry Park at a signing ceremony for the project held in Shenyang on Jan 9 2017.

Sino-Uganda Mbale Industrial Park

The park with a total investment of more than $600m (about Shs2.2 trillion) was inaugurated by president Museveni in March. It is expected to house 55 factories and create 15,000 jobs for Ugandans. It is located in Bukasakya Sub-county in Mbale District.

A consortium of eight Chinese enterprises last year signed agreements with Tian Tang Group headed by Mr Paul Zang, to invest in the park which measures 2.51 square kilometers.

The U.S. $620m venture by Guangzhou Dongsong Energy Group, is expected to create over 1,700 jobs in its first phase. Located in the sub-counties of Rubongi and Osukuru in Tororo district, the project will process phosphates into fertiliser and other products.

In 2013, the Ugandan government awarded a mining lease to Guangzhou Dongsong Energy Group Company Ltd to mine phosphates in Sukuru hill.

Once completed, the Sukuru industrial complex will house a phosphate fertiliser plant, a steel mill, a power plant, sulphuric acid factory and a glass making plant. The industrial park is being built on 26.47 square kilometres of land.

Analysts say value addition to Uganda’s mineral wealth and agricultural products should be the key goal of Chinese-led industrial parks.

“China is highly integrated in the Global Value Chains (GVCs). Uganda's industrial capacity cooperation with China therefore gives us an opportunity to upgrade in the GVCs, especially in agro-industrial products. Cotton and textile sector is one area where Uganda can learn from China and seek to facilitate technological diffusion to transform the country's textile industry. This is because we export almost 95 percent of our cotton as lint and yet China consumes most of its lint domestically and exports apparel and clothing products. This however, can only be done if we develop and implement a conducive policy which facilitates technological transfer and meaningful integration in the global economy, which is currently lacking,” said Munu, a trade and investment researcher.

"China working with Africa for mutual prosperity"

Elizabeth Namusoke, 33, works at the food-processing factory in the Liaoshen park. Before the park opened, Namazzi was jobless. Her husband, a teacher, was struggling to provide for the family on his $100 salary.

“My salary supplements that of my husband and we are to save a small percentage,” Namazzi said. Namazzi and her husband have established a fruit orchard on their two-acre piece of land. They hope to start selling mangoes to the fruit processing factory in the industrial park.

While inspecting the park in February, president Museveni commended China for investing in Africa.

"Now China is doing more to support Africa and Uganda in particular. They are working with Africa for mutual prosperity," the president said.

“What Uganda wants out of industrial capacity cooperation with China is to add values to its agricultural exports. It wants to become a manufacturing economy with agro-processing as the base”, said Martin Luther Munu, a research analyst at Uganda’s Economic Policy Research Centre (EPRC).

Industrialization is liberating

In his 2017 new year’s address, President Museveni said Uganda’s economy had long suffered due to importing more than what it exports to other countries, resulting in a huge negative balance of trade. He said that it was high time the country embarked on mass industrialization to produce for the local market and for export.

He said his government would embark on large scale industrialization, noting that “industrialization is an instrument of liberation and a means of achieving prosperity”.

Museveni cited China, which he said exports to Uganda goods worth US$875 million dollars while importing from Uganda goods worth US$54.7 million dollars and India which exports to Uganda goods worth US$1.154 billion while Uganda only exports to India goods worth US$24.8 million. He termed the trade deficit as a hemorrhage of both money and jobs.

For Moses Tumuramye, a welder, the Liaoshen industrial park set his business free. The 28 year old used to struggle to make doors and windows for his customers. The gasoline generator he was using to weld was driving his operational costs high.

“The industrial park helped bring electricity to the trading centre where my business is located. Now I am able to make a small profit because I no longer have to buy fuel for the generator”, Tumuramye said.

Unlocking Uganda’s potential to industrialize

While speaking at the fifth International Conference on African development (TICAD) in Japan in 2013, president Museveni listed inadequate development of the infrastructure, especially electricity, the railways, the roads, ICT and an undeveloped human resource as some of the challenges hindering Africa and indeed Uganda from developing.

Uganda identified electricity as one of the major bottlenecks to industrialization. The country’s efforts to industrialize took a dive in 2006 when the country was hit by a major power shortage. As a result, some manufacturers moved to neighbors Kenya and Tanzania to take advantage of reliable and cheaper power.

Since 2006, Uganda has invested over $3bn in energy projects. In 2012, the $900m Bujagali hydro project was switched on. It added 250MW to the national grid, bringing much needed stability to energy supply. The subsequent commissioning of several mini hydro power plants led to surplus energy being generated.

According to Uganda Electricity Generation Company Limited (UEGCL), the generators of Uganda’s electricity, Uganda’s installed generation capacity is currently about 862MW – including 100MW from the heavy fuel generators – and effective demand is just short of 600MW. The total redundancy is estimated at about 200MW.

However,authorities believed the surplus will be swallowed up in the next two years when the economy makes a full recovery. Selestino Babungi, the Chief Executive Officer of UMEME, the electricity distributors in Uganda says the surplus will not last a long time.

“Supply should move ahead of demand. In fact, infrastructure, even if it is an industrial investor, they will look at whether there is enough supply for the next five years. Otherwise, no industries will set-up if a country does not have enough power”, he explained.

Currently, two hydro power stations are nearing completion in the central and north of the country.

Isimba (183MW) and Karuma (600MMW) are being built by China Water and Electric and Sino hydro respectively at a cost of around $3bn with financing coming from the Export and Import (EXIM) bank of China. Once on board, the two projects will increase Uganda’s installed capacity to 1,683MW.

Ugandan authorities believed the surplus electricity will easily be scooped up as it seeks to power the various industrial parks across the country.

More industrial parks for investors

Uganda Investment Authority, Uganda’s agency in charge of investments has just finished a project to map the country’s industrial potential based on the comparative advantage regions enjoy over others.

The authority has embraced an automation drive to cut red tape.

Some of the industrial parks include the Kampala Industrial and Business Park (KIBP), a 2,200 acre expanse of land close to the capital, Luzira Industrial and Business Park, Bweyogerere Industrial Estate, Jinja Industrial and Business Park, Kasese Industrial and Business Park, Soroti Industrial and Business Park, Mbarara SME Park, Kashari Agricultural Park and Mbale Industrial and Business Park.

To further drive investment, Uganda’s president Yoweri Museveni has ordered the planning commission of the ministry of Finance to plan and create industrial parks in the major cities based on natural resources.

The commission has identified the northwestern region of the country as a hub for honey, fruits, coffee processing, textiles and fish processing in the Nile Valley. The mid-northern region of Lango has been set aside for investors in textiles, cassava processing, and oil seeds processing.

Munu says that as Uganda opens more industrial parks, the government should think of partnering with Chinese investors as opposed to leaving industrialization to the private sector.

“Uganda's needs to rethink the role of the state in industrial development. The private sector alone cannot transform the industrial sector as some critical investments do not present quick returns and yet this is the incentive for private investments. We need direct state intervention and a well thought Public Private Partnership arrangement which ensures the risks and profits are equitably shared”, Munu asserted.